Wednesday, February 15, 2012

Budgets For Dummies

Budgets For Dummies

Bill,

Since macroeconomics seems beyond me (seems a bit beyond a lot of other folks too), I’ll resort to the back-of-the-envelope calculation I do every payday to see where things in the Butcher household are at. If you spend less than you take in you make out. If you spend more, sooner of later you go broke.

We both agree that we are spending way more money than we take in, and we also believe that the nation’s long term fiscal health depends upon altering that unsustainable path. And I’ll wager that we also agree that the current paralysis over this issue is a conspiracy in which virtually the entire society, with the exception of a few curmudgeons like you and me, is complicit. And I at least believe that the increasing globalization of the world economy means that America’s share of the overall economic pie will continue to shrink no matter how successfully we compete.

In short, I believe that country is going to be poorer than it was in the unprecedented period from, say, 1950 -2000, and that we are going to have to live within our means while we continue to compete, ferociously for our share of the world economic pie. But the President’s smoke-and-mirrors budget (this makes him unique?) is a side show in solving that long term problem.

Where we differ, along with a lot of other supposedly very smart people, is how to do it. Even Robert Kagan whom you admire and who is backing Romney in the Republican presidential sweepstakes but is read by Obama, argues that his optimistic view of America’s future depends upon continued investment in the countries vital social and intellectual capital .

In my view then, we must

1) Avoid truncating the recovery by cutting too much or too soon (how Krugmanesque of me).

2) Continue to invest in vital sectors such as intellectual capital and infrastructure.

3) Promote fairness (we can talk about what that means in future posts).

4) Stop subsidizing inefficiencies for special interest groups.

5) At the very least, avoid polices that promote social disintegration (we’ll talk about that too)